How do external auditors differ from internal auditors?

External auditors are distinct from internal auditors primarily in their role and the nature of their work. External auditors are typically independent professionals or firms hired by an organization to conduct an audit of its financial statements and operations. Their independent review is crucial because it helps ensure credibility and transparency, forming an essential part of the accountability framework for stakeholders, such as investors, creditors, and regulatory bodies. This independence helps to enhance the reliability of the audit findings and supports stakeholder trust in the financial reporting of the organization.

In contrast, internal auditors are employees of the organization, conducting audits on various aspects of operations, compliance, and risk management to help improve the efficiency and effectiveness of the organization's processes. Additionally, internal auditors may focus on a wider range of audits beyond financial ones, including operational and compliance audits, and they often follow the standards set by professional bodies like the Institute of Internal Auditors.

The other answers do not accurately capture the essence of how external auditors differ from internal auditors, as they either mischaracterize the roles or provide a limited view of the functions of internal auditors.